1. Competition and Monopolies
Economics Chapter 9
Competition and Monopolies

2. Perfect Competition: Section 1
Market Structure- the amount of competition they face.
Perfect Competition
A Large Market- many buyers and sellers.
A Nearly Identical Product
Easy entry and Exit
Easily Obtainable Information
Independence

3. Perfect Competition Prices are set by Supply and Demand.
Information is the key
Agriculture as an Example
Farmers have no control of price, set by the market.
Demand inelastic while supply is dependent on outside factors.
Economic efficiency stressed.

4. Monopoly, Oligopoly, Monopolistic Competition
Monopoly- single supplier controls market.
Raise prices but not too high, law of demand kicks in.
Barriers to entry- They don’t allow new companies.
State Laws- electric companies
“excessive money capital costs”- Steel production

5. Types of Monopolies
Natural- Government grants exclusive rights. Cable, utilities, bus companies
Geographic- business is isolated
Technological- patents and copyrights
Government- roads and bridge construction

6. Oligopoly Industry dominated by a few suppliers.
Some control over price.
Product Differentiation- minor differences in quality and features to differentiate.
Interdependent Behavior- What one does others follow
Collusion- illegally agreeing to raise prices.
Cartel

7. Monopolistic Competition
Large number of sellers offer similar products.
Some control over price.
Brand loyalty the key.
Competitive advertising

8. Government Policies toward Competition
Antitrust Legislation and Mergers
John D. Rockefeller
Interlocking directorates- board members serving on competing companies boards
Sherman Antitrust Act (1890)- prevent monopolies
Clayton Act (1914)
Merger- combining 2 or more corporations
Horizontal or vertical
Conglomerate- huge corporation

9. Government Regulation
From regulation to deregulation.
1980s and 90s less regulation and control of certain industries.
FCC deregulation led to pay-TV
Foreign competitors the problem for U.S. firms. Auto industry.